June 26, 2008
I am a little confused. How can you take an insurance product and make it a securities product. In the proposed ruling you state that a significant portion of the investment risk is passed onto the annuitiant with Indexed Annuities. How is this? The worst case for a client is that they will get no growth in a year. The risk is on the insurance company for the management of the portfolio which is designed with (AGAIN) Guaranteed formulas. If the portfolio goes up they pay an interest rate. NEVER AND I MEAN NEVER does the clients money even come close to being directly invested in the market. These are not even close to Variable annuities or Securities which have a GREAT potential for loss, and for some reason they often get put into the same catagory.
Let's see if we can keep this simple,
Securities you CAN LOSE MONEY because your money is invested in the market
INSURANCE PRODUCTS LIKE INDEXED ANNUITIES, YOU CAN'T LOSE MONEY because your money NEVER goes into the market
Is it really not more complicated than that?
In the real world outside of the committee meetings, people buy Indexed annuities for the GUARANTEES which they do a Great job of providing. Guarantees of NO Loss
If you are considering this to protect seniors you are looking at the wrong products. I have seen many instances of abuse on the securites side with 70 + year olds having a significant portion 80%+ of assets in securites, Let me ask you is that suitable EVER? I don't think so. Where is your increased regulation on that?
The bottom line, Indexed annuities are fixed insurance products with the investment risk on the insurance company and not on the client. The worst case for a client is a zero if the market goes down, that's true guarantee, that's TRUE money insurance. As far as surrender charges (most waived at death), all products have these if you go outside of the FREE withdrawal amounts, fixed annuities as well as perm life policies. Clients understand these.
I urge you to recondider this, it doesn't make sense for the SEC to regulate insurance products, Insurance Depts should. What's next Life insurance or Real Estate (you know Real Estate is sold as an investment and many people have lost money lately in that)?????